Sprint, the Media and the Truth about Customer Satisfaction

Posted: 09/1998

Sprint, the Media and the Truth about Customer Satisfaction

By Casey Freymuth

For the fourth consecutive year, Sprint Communications Co. has topped the industry in
J.D. Power and Associates’ 1998 Residential Long Distance Telephone Customer Satisfaction
Study (see page 19) among high-volume users spending more than $50 per month. Undoubtedly,
major newspapers nationwide will be wowed by news of Sprint’s performance, earning the No.
3 long distance provider greater credibility with the public at large. After all, the
study cites "trust" as a major factor influencing satisfaction among
consumers–confidence no doubt shaken in part due to confusion of industry consolidation.
Surveyors found that consumers are concerned about the ongoing changes in the
telecommunications industry and the ability of providers "to honestly deliver
products with no gimmicks, misleading ads or hidden charges."

Hmmm. No gimmicks, misleading ads or hidden charges. Isn’t Sprint the company that,
until very recently, charged 22 cents during the day while it rolled a dime-a-minute
through Central Park during prime-time television? So what, exactly, is a gimmick,
misleading ad or hidden charge? The answer to this question is quite simple–it’s whatever
the public believes. And, if this is the case, why are lower-tier competitors struggling
to keep residential customers under copycat plans? The answer to this question also is
quite simple–lower-tier competitors can’t afford to put a dime rolling down Central Park
on prime-time television.

Without brand name awareness, competitors are subjected to tougher scrutiny. Their
customers do the math and discover that when off-peak calls, surcharges, minimums and fees
are totaled, they’re paying more than a dime a minute to make a call. They’re concerned
because Sprint only charges a dime per minute, which must be true because the company says
it every night during "Seinfeld."

Intelligence = Intelligent Response

If a financial disadvantage keeps competitors from successfully playing the same game
as the mass media players, how do competitors improve customer satisfaction? They do it by
taking polls of their own customer bases. Not half-hearted surveys stuffed in bills and
welcome packets, mind you, but real, professionally drafted surveys that include
compensation to respondents and statistical analysis. Consider the following points:

Fact: A service provider’s single greatest asset is its
customer base, and recent studies indicate that a forthcoming glut in bandwidth supply can
only reinforce the idea that owning customers is the end game of the future.

Fact: Service providers invest more in customers they don’t
have than in those they do. Despite widespread recognition of the impact of customer
retention on the bottom line, the 90/10 sales-to-retention investment ratio is alive and
well in the telecom industry.

Fact: The above ratio needs to change, or smaller providers
will never conquer customer churn.

Let’s put it another way. If you think you’re investing enough in customer retention,
ask yourself these questions:

• What do your customers like most about your company?
• What do your customers think you should do differently?
• Why did your customers sign up to start with?
• What do they say about what they’re getting?
• When your customers leave, where do they go? Why?
• What is your company’s historical reduction in customer attrition for every dollar you
  invest in retention?

If you can’t answer these questions, don’t beat yourself up. Only a handful of
professionals can–in virtually any industry. Yet, without the ability to answer these
simple questions, no executive can make effective decisions regarding customer retention.

Still Not Convinced? Consider This …

Every company is unique and retention and development plans have to be tailored to each
company’s characteristics, yet there are "universal truths" that have surfaced
over the years, and they are critical to a company’s ability to develop healthy, valuable
business. The following is a small sample of these truths:

• All discussions about bulk revenues aside, retention is the factor with the single
  greatest impact on terminal (residual) value, which is the primary determinant for the
  amount a purchasing company can invest in an acquisition candidate.
• Retention also is the single greatest factor in growth of revenues and profits. A
  company with a fixed budget for sales and retention can achieve triple-digit growth by
  diverting funds from new customer acquisition to existing customer retention.
• Few customers leave their providers because they are dissatisfied with those providers.
  The line between attrition and retention is fine, and from a business development
  standpoint, a successful retention plan usually is easier to implement than expansions in
  sales and/or product. At the very least, it is simple enough to be implemented in
  conjunction with other efforts, and ignoring it altogether is, as demonstrated in the
  above points, stepping over a dollar to make a dime.
• Inbound customer complaints are not indicative of the opinions of a customer base as a
  whole. Outbound surveys yield very different customer opinions.
• Customers are more willing to talk than most companies realize. If a company is willing
  to provide a customer with a nominal credit on his or her statement, that customer will
  take the time to fill out a basic questionnaire and return it to the company. Most
  customer bases will respond at 70 percent or greater at this level of reward. (Note:
  sampling techniques are used to keep budgets manageable.)
• Retention plans are based on customer input work. When customers voice their opinions,
  the cloudiness surrounding where to invest in retention evaporates. Many times, customer
  retention can be curbed by simple adjustments in scripting and other processes that don’t
  overset customer expectations.

Conclusion

Failing to invest in customer retention is failure to invest in residual value.
With-out such investment, all other business development efforts are futile. Without
information, you don’t know where to put your retention investment dollars. The J. D.
Power and Associates’ award that Sprint has earned for the fourth straight time says a
great deal about Sprint and what works for the company. And you can bet your bottom dollar
that what works for Sprint will not work for you. Just ask your customers.

Casey Freymuth is president of Group IV Inc., a Phoenix-based consulting firm
specializing in strategic and operational issues in the global telecommunications and
utility industries. He can be reached via e-mail at info@group-iv.com.